Reasons for a Bypass Trust After Portability

After the American Taxpayer Relief Act of 2012 made portability permanent, many Americans with bypass trusts began to wonder whether the trusts were still necessary. As a recent article explains, there are several reasons why it may still be a good idea to incorporate a bypass trust into your estate plan.

Essentially, portability allows the surviving spouse to use the unused portion of the first-to-die spouse’s estate tax exemption for his or her estate. Before portability became permanent, spouses used a bypass trust to achieve the same goal. However, there are still several reasons  – listed below – why a bypass trust may be beneficial for some estates:

  • There is no guarantee that the first-to-die spouse will have an unused exemption amount
  • Assets that appreciate in value after being placed in a bypass trust will not be taxed as part of the surviving spouse’s estate
  • A bypass trust will protect included assets from the trust creator, as well as the trust beneficiaries
  • A well funded bypass trust helps a re-married parent to ensure that some of his or her assets are passed down to his or her children with his or her first spouse
  • A bypass trust preserves the generation-skipping transfer tax exemption, which is not portable.

For assistance in determining whether a bypass trust is right for you, contact us at (626) 696-3145.

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